THE PESO weakened on Wednesday with the market factoring in a possible rate cut this Thursday and on expectations of upbeat US non-manufacturing data.
The local unit closed at P50.92 per dollar on Wednesday, depreciating by 15.5 centavos from its P50.765 finish on Tuesday, according to data from the website of the Bankers’ Association of the Philippines.
The peso started the session at P50.70 against the dollar, which was its intraday best. Its weakest showing for the day was its close of P50.92 versus the greenback.
Dollars traded slipped to $930.6 million from $953.9 million on Tuesday.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso’s depreciation may have been due to market expectations of a rate cut on Thursday.
“Peso [was] also weaker amid possible 0.25 [percentage point] cut in local policy rates in view of Thursday’s monetary policy-setting meeting, as any rate cut could narrow the peso’s differential with the US dollar and other major global currencies, amid recent upward normalization of the interest rate,” Mr. Ricafort said in a text message.
In a BusinessWorld poll last week, 10 out of the 13 analysts said that they expect the Monetary Board to trim key policy rates this Thursday amid emerging upside risks to inflation.
BSP Governor Benjamin E. Diokno has said they are looking to cut rates by at least 50 basis points (bps) this year, with a 25-bp reduction possible this quarter.
The BSP’s policy-setting Monetary Board will meet twice in the first quarter — today and on Mar. 19.
The overnight reverse repurchase rate is currently at four percent, while overnight deposit and lending rates are at 3.5% and 4.5%, respectively.
Meanwhile, inflation quickened to 2.9% in January from 2.5% in December due to an uptick in prices of food, clothing, transport and utilities, according to the Philippine Statistics Authority. The print was the fastest in eight months.
Meanwhile, a trader attributed the peso’s weakness to market expectations of key US data.
“The peso depreciated today as market participants positioned ahead of likely upbeat US non-manufacturing data overnight,” the trader said in an e-mail.
For today, Mr. Ricafort sees the peso playing around the P50.75-P51 band while the trader expects the local unit to range at P50.80-P51. — L.W.T. Noble